Trade-Revealed TFP

Andrea Finicelli, Patrizio Pagano () and Massimo Sbracia

No 729, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We introduce a novel methodology to measure the relative TFP of the tradeable sector across countries, based on the relationship between trade and TFP in the model of Eaton and Kortum (2002). The logic of our approach is to measure TFP not from its "primitive" (the production function) but from its observed implications. In particular, we estimate TFPs as the productivities that best fit data on trade, production, and wages. Applying this methodology to a sample of 19 OECD countries, we estimate the TFP of each country's manufacturing sector from 1985 to 2002. Our measures are easy to compute and, with respect to the standard development-accounting approach, are no longer mere residuals. Nor do they yield common "anomalies", such as the higher TFP of Italy relative to the US.

Keywords: Multi-factor productivity; TFP measurement; Eaton-Kortum model (search for similar items in EconPapers)
JEL-codes: D24 F10 O40 (search for similar items in EconPapers)
Date: 2009-10
New Economics Papers: this item is included in nep-cba, nep-eff and nep-int
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Citations: View citations in EconPapers (4)

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Related works:
Working Paper: Trade-revealed TFP (2009)
Working Paper: Trade-revealed TFP (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_729_09

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